Home / Regulatory & Government / Industry ramps up case for ESL removal at Senate inquiry
13 July 2020
The insurance industry made another united push for tax reforms at a Senate inquiry on Friday, saying the NSW Emergency Services Levy (ESL) and other insurance duties will worsen the under-insurance problem as the virus-hit economy weakens further.
Residents in NSW in particular are set to pay the heaviest price, with the ESL to increase by more than 20% in this current financial year, the Senate inquiry into the 2019/20 bushfire season was told.
NSW already has a chronic problem with under and non-insurance because of the punitive ESL charge.
“With the current [economic] climate, not only are we going to have an increase in levy, we are actually going to have a reduction in the number of contributors to that as businesses are not going to last,” National Insurance Brokers Association (NIBA) President Eric Harris said.
“So it’s going to have a double impact.”
NIBA CEO Dallas Booth says the NSW Government will raise more than $1 billion from the ESL charge this financial year, describing it as a “massive increase in the cost of insurance for property” in the state.
Insurance Council of Australia CEO Rob Whelan also made a strong push for removal of the ESL, explaining to the Senate inquiry the tax has a “compounding effect” when GST and stamp duties are added in.
“The effect of that is quite substantial on individual policyholders, to the extent that close to 50% of premiums charged in total to an insured person in NSW is taxation, and that goes up to as far as 70% for businesses in certain areas as well,” Mr Whelan said.
“The cost of emergency services in NSW is going up, not down. Stamp duties in other states have gone up and the propensity of state governments is to increase those.”
At the hearing on Friday climate change also emerged as a hot button issue, when the industry was pressed to explain its “deafening silence” on the urgency of cutting carbon emissions levels.
Senator Tim Ayres, who is heading the inquiry as Chair of the Finance and Public Administration References Committee, questioned why insurers are so vocal in pushing for increased action on mitigation, but not emissions reductions as a way to keep premiums affordable.
“You are keen to push the Government along on a whole range of questions, but there is a deafening silence when it comes to climate change and emission reductions,” he said.
Allianz Chief Corporate Affairs Officer Nicholas Scofield said “it just comes down to the fact that emissions reduction is a very polarised debate in Australia”.
“And I think as insurers we have taken the view that we don’t want to put ourselves in the middle of a highly charged political debate.”